Wells Fargo (WFC) says it will stop all reordering of withdrawals from its customers' accounts from the largest amount to the smallest, abandoning a practice that often led to overdrafts and drew the ire of consumer advocates.
Starting Aug. 11, the San Francisco bank will no longer use so-called high-to-low reordering for deposited checks, as well as for recurring electronic debits from its customers' accounts, according to spokeswoman Richele Messick.
Instead, Wells Fargo will post all checks and recurring electronic debits based on the date and time they're received. If the time and date aren't available, the transactions will be posted from low amount to high. Those practices are widely seen as more consumer-friendly, because they decrease the chance that the account will go into negative territory.
Wells Fargo was already posting debit-card purchases, ATM withdrawals and online bill pay transactions based on their date and time, according to Messick. So the new policy means that all transactions that result in a debit from a Wells Fargo account will be posted according to the same guidelines.
"We think that it's simpler for everybody, especially our customers," Messick said.
Wells was ordered by a federal judge in May 2013 to pay a $203 million penalty for reordering transactions from the largest to the smallest.
An April 2014 report by the Pew Charitable Trusts found that 22 out of 44 large banks analyzed still did some high-to-low reordering. But it also found that big banks have gradually been making their overdraft policies more consumer-friendly.
The Consumer Financial Protection Bureau has been studying bank overdraft practices and is expected to release its second report on the subject later this year.
Wells Fargo's current overdraft fee is $35. During a conference call with analysts Friday, Wells Chief Executive John Stumpf was asked whether the policy change will affect the amount of revenue that Wells collects in deposit service charges.
"It's not going to be meaningful," Stumpf responded.